Working Paper: NBER ID: w19352
Authors: Vivek Bhattacharya; James W. Roberts; Andrew Sweeting
Abstract: Regulating bidder participation in auctions can potentially increase efficiency compared to standard auction formats with free entry. We show that the relative performance of two such mechanisms, a standard first-price auction with free entry and an entry rights auction, depends non-monotonically on the precision of information that bidders have about their costs prior to deciding whether to participate in a mechanism. As an empirical application, we estimate parameters from first-price auctions with free entry for bridge-building contracts in Oklahoma and Texas and predict that an entry rights auction increases efficiency and reduces procurement costs significantly.
Keywords: auctions; entry; information; procurement; selection
JEL Codes: C72; D44; L20; L92
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| auction mechanism type (entry rights auction) (D44) | auction efficiency (D44) |
| auction mechanism type (entry rights auction) (D44) | procurement costs (H57) |
| precision of bidders' pre-entry information (D44) | auction efficiency (D44) |
| precision of bidders' pre-entry information (D44) | procurement costs (H57) |
| auction mechanism type (entry rights auction) (D44) | auction outcomes (D44) |